What do I need to know to build the business case for CHP?

Answer by Dale Blundell (Atkins)

Correct sizing of the CHP is essential for CHP to be economically viable, which should be based on a full site survey and energy demand review.

Critical information for developing the business case would include:

  • Predicted annual heat and electricity demand.
  • Matching of heat and electricity demand to proposed CHP plant operating schedule.
  • Predicted CHP fuel consumption and security of supply concerns (such as gas connection, logistics for road delivered fuels or availability of biomass fuel).
  • Current and future costs of energy, and price for exported electricity.
  • Capital cost of the CHP and balance of plant such as pumps, pressurisation systems and heat rejection equipment (if required).
  • Complete costs to install the system, including the Network Operator and Planning Authorities.
  • Current boiler efficiency.
  • Cost of finance (if required).
  • Value of ‘Carbon’ (if required).
  • Value attached to the corporate image and security of supply
  • Value attributable to other business drivers e.g. avoided cost of upgrading local electricity network to accommodate an increase in production.

The business case is determined from the trade-off between the potential financial savings in energy with the costs to procure, install and operate the CHP system.  The amount of electricity and heat generated is determined by the size of CHP, run hours, energy tariffs (including taxes and levies) and the site demand profile. 

Capital costs

In addition to the CHP equipment, other capital costs include enabling costs, civils, mechanical & electrical works, construction of buildings to house the plant, operating permits, planning permission and electrical connection licences.  

Operational costs

O&M may be conducted utilising own trained staff or by a third party.  Third party support can range from basic maintenance excluding spares and components, to a fully comprehensive O&M Contract